Dutch banking from home (memo to Canadian banks looking for my business)

04Mar12

My bank in Canada recently introduced a feature which allows their clients with personal accounts to transfer money to other bank accounts for the not-so-low price of 1.50 loonies per transfer. For those of you who pay your rent/mortgage/bills/friends-who-bought-dinner-for-you-last-night by signing and mailing a paper cheque, this may sound like a real advance in banking practices – except that people banking in the Netherlands have been able to transfer money this way for years, for FREE.

When I opened my Dutch bank account the bank gave me a little gizmo (“e-dentifier”) that essentially allows me to turn my laptop into a bank machine:

To authorize a payment from my online Dutch bank account, I log in to my account on the bank website and enter the sum to transfer, the bank account number and the name of the person/business I want to transfer the money to. I then swipe my bank card through the “e-dentifier” and enter my pin number, along with an electronic key (a string of numbers) generated on the bank website for that particular transaction.

The e-dentifier itself also generates an electronic key, which I type in on the bank website. Voila, my transaction is authorized and my PIN and card information never had to be transmitted over the internet!

This payment system (iDEAL) is so widespread that in many situations where you would otherwise use a credit card it is possible – and often cheaper – to pay directly from your bank account. Doing bank transfers at home without having to futz with cheques is such a massive convenience that if another Canadian bank were to adopt this payment method, I would probably bail out of my current bank.

Of course, there are some aspects of the Dutch banking system that I would not urge others to copy: the Dirk Scheringa bank collapsed after selling too many mortgages (along with insurance against excessively high rates) to people for whom the payments far exceeded their means. The bank subsequently imploded, taking with it much of the funding for Dutch speed-skating teams!